2016 (4) TMI 243 - AT - Income Tax

Addition on account of living and life style expenses - Held that - The TIs dated 16/7/2000 and 23/7/2000 on UBS AG, Zurich have been issued from Dubai; from Hotel Intercontinental, Dubai, stated as his camp office. Then, the assessee has issued a notarized statement on 30.06.2003 at London, wherein he admits to have visited Switzerland in February, 2001. The same would entail, apart from travel expenditure, boarding and lodging costs, far in excess of that inures while staying at one s residence in India. The assessee is also suffering health problems and undergoing treatment from leading hospitals and clinics at Pune/ Mumbai, as evidenced by the medical reports filed by him and his wife, RHAK, in appellate proceedings, also entailing expenditure in tidy sums. We, accordingly, consider the assessment of living and life style expenditure at ₹ 30 lacs p.a. as reasonable. The assessee is, without doubt, entitled to credit for the withdrawal for such expenditure booked in accounts Non-grant of telescoping benefit - Held that - The plea could in fact be available only where the assessee accepts the addition, claiming a double addition, leading to a double jeopardy. Be that as it may, we have already restored the assessment on some grounds, while confirming some additions. The principles of telescoping are well laid out by the Hon ble Apex Court, as in the case of Anantharam Veerasinghaiah & Co. v. CIT 1980 (4) TMI 2 - SUPREME Court . The AO shall, in the set aside proceedings, consider the assessee s case in this respect, where one is made out, in accordance with law. This disposes the assessee s said ground, as well as similar ground/s for other years as well, where we observe the assessee contends of an addition as having been already returned, i.e., forming part of his returned income. The AO shall allow credit on the basis of verifiable cash flows, assuming annualized income/expenditure on a uniform basis, while taking others on the basis of actual date (of investment, expenditure, etc.), also accounting for the payment of tax, again, on defined dates Addition as undisclosed income - Held that - As payment (USD 20 million) (200 lacs) was made, which would require being verified, it implies that the down payment of CHF 2.5 lacs to be made by 03.8.2001, stood also made, at least in all probability. It is in fact difficult to believe that such a deal/agreement was finalised and, further, in subsistence, at least for some time, without any money being exchanged, i.e., even as clearly it was not carried out fully and fell through. The assessee, who has not denied signing the document (on behalf of self), or of being not in Switzerland where the document seems to have been executed (and which could be proved on the basis of entries in his passport), has not helped matters at all by not issuing any explanation what-so-ever in the matter. No definite findings the issue being primarily factual could under the circumstances be issued at this stage, and the matter clearly requires being remanded back for the purpose. The matter shall, accordingly, stand to be set aside to the file of the A.O., who shall re-adjudicate afresh. Addition on account of alleged undisclosed expenditure - Held that - Incurring expenditure of the like stated in the invoice, viz. hotel, telephone, travel, etc., besides being only understandable, is thus corroborative. That the amounts should be accumulated for so long; the period of expenditure covered by the bill extending beyond six months, is itself surprising. Why the payments would not be made, being for expenditure which ought to be financed by the assessee in the first place, belies comprehension. The assessee s case is sans any explanation. We, accordingly, confirm the addition to the extent of CHF 216,169, applying the same conversion rate, which is not in dispute. Addition qua three transfer instructions (TIs) - Held that -Materials, apart from that found from the seized laptop, were also seized, which are corroborative, independently establishing their veracity. That is, the truth of the documents gets established even independent of the provision of s. 292-C of the Act. The statement/s by PA, made on oath, would be admissible in evidence u/s.132(4) or, as the case may be, s. 131 of the Act. The assessee in fact has not denied or rebutted the statement/s; rather, further presses on PA s statement/s before the ED in proceedings under PMLA, without of course making them a part of the record. The plea that the laptop did not belong to the assessee, but to PA, which may well be true, would thus be of no moment, both in law as well as in the facts and circumstances of the case. Undisclosed income by way of alleged unexplained balance in account with UBS - Held that - All that has been retained by both the parties, or survives, is the Agreement dated 07/8/2001 Even if therefore it is shown by the assessee that the TIs for USD 200M are in pursuance of the Agreement dated 07/8/2001, the source thereof as being profits earned to that or whatever extent, in the past, shall require being shown or reasonably proved, for it to be accepted. The payment as listed at Sr. No. 6 of the table, being in relation to an Agreement dated 18.7.2001, due to be paid, has been also noted by us for A.Y. 2002-03 (vide para 22(b) of this order). Without doubt, the same being in respect of a single payment, could, even assuming so, be brought to tax for either year. The A.O., who has added the purchase amount as well as qua payment in its respect, shall have regard to this aspect. We decide accordingly, and the assessee s ground is partly allowed and partly allowed for statistical purposes Addition toward gift/s to son, Syed Mohammad Sameer Uddin Ali Khan, Hyderabad - Held that - The assessee s written submissions are silent on this aspect of the matter. We find no reason, in view of the undisputed facts stated above, not to confirm the addition. We decide accordingly. Investment in a Mercedes car - Held that - As regards the payment per EMIs, registration and insurance charges, falling during the year, the assessee has produced a cash statement, which has been disregarded for want of both, authenticity and adequacy. When separate addition is being made by the Revenue for household expenses, being part of the living expenses, which should also include that toward running of vehicle, denial of credit for the income applied toward the payment of EMIs for the year cannot be appreciated. The ld. CIT(A) could have definitely proposed, and where unexplained, made an enhancement toward unexplained payment of EMIs falling in other years, which surely cannot be considered for the current year, so that reference thereto is misplaced. Further, even assuming to be unexplained, how we wonder the addition for the current year could exceed the EMIs paid, of course, as increased by the registration and insurance cost, if any, paid during the year. Under the circumstances, we only consider it fit and proper to restore the matter back to the file of the assessing authority to adjudicate afresh. Addition on saving account balance - Held that - Apart from merely stating that the ld. CIT(A) had erred, no definite case has been made out before us. The same, even otherwise; the matter being factual, would be of little consequence in the absence of any material on record to establish the assessee s case, which has been held as an after-thought by the ld. CIT(A) before whom the books of account were not produced. We, accordingly, have no reason to interfere with his order, except for deleting ₹ 3 lacs, being in relation to the cash deposit on 31.3.2004, which is apparent from the date-wise statement of cash deposit, listed in the assessment and the impugned order itself. Further, the A.O. shall, while giving effect to her order, take into account the said cash deposits, including ₹ 3 lacs on 31.3.2004, while reckoning the availability of finance for other purposes with the assessee. We decide accordingly. Unexplained deposit/investment by way of repayment of bank loan - Held that - The loan under reference is a housing loan in the name of RHAK, advanced on 13.3.2004. The repayment during the year has been confirmed by the ld. CIT(A) at ₹ 1.35 lacs, as against ₹ 1.20 lacs, as contended by the assessee before him. We, accordingly, find no ground for interference. Addition toward transfer instructions - Held that - We are acutely conscious that the amount under reference is astronomical. At the same time, however, we cannot disregard the clear evidences found in or as a result of search. The additions made, it may be appreciated, are only on the basis of objective materials totally unexplained and, further, in agreement with the other materials found and in possession of the Revenue. Why, the notarized statement dated 30.06.2003 supra (Ann. C), itself contains details of the assessee s relationship with UBS, with account opened as far back as in 1982, with USD 5M, as also details of transfer of huge funds. The assessee s stand of complete denial is only toward stalling the process of law, which continues even before us. The same is clearly aimed at providing no clue whatsoever to the Revenue as to how he, at best only a horse trainer in India, had access to such sums, visiting and staying at Switzerland, Dubai, London, Hongkong, etc. on a regular basis, in fact since 1980s. The matter is accordingly restored to the file of the A.O. for adjudication afresh in accordance with the law by issuing definite findings of fact, and after allowing the assessee reasonable opportunity to present his case. We decide accordingly. Unexplained investment in race horses - Held that - We find little merit in the assessee s case. The assessee per his written submissions (WS-5) challenges the valuation, without bringing any material on record. So, however, the detail of the nine horses purchased, reveals one horse Bu Attifel to be purchased on 19.8.2005. The said date falls outside the relevant previous year. Accordingly, the addition is confirmed at ₹ 8 lacs Disallowance of loss on horse betting - Held that - The Revenue has denied the claim of the impugned loss in view of it being unevidenced. The assessee s alluding to section 74A is thus of no moment. In fact, even section 74A refers to the activity of owning and maintaining race horses, while the loss under reference is on horse betting, which is a different activity altogether. The assessee s claim is thus not maintainable of all fours Unexplained expenditure on air ticket - Held that - The document has been found during search from the assessee s residence. The fact of travel is not denied. It is for the assessee under the circumstances to prove that, despite so, expenditure was incurred by someone else, which he now claims as by KT. Merely stating so is of no consequence. We find no reason not to confirm the addition. Addition on cancellation deed - Held that - The cancellation deed is in respect of lease deed dated 11.4.2005. However, the question is of time. It cannot, on the basis of the material on record, be said that it was during the current year. The Revenue has also not questioned the assessee on this aspect, for us to draw any adverse inference on nonfurnishing of proper explanation by the assessee. The only impact that we discern is that the assessee s cash flow would witness an inflow and outflow for that sum on 11.4.2005 and 29.4.2005 respectively. The addition is deleted. Disallowance of loss - Held that - If the loss is disallowed, on which penalty is also initiated, it only implies that there is availability of cash at ₹ 24.11 lacs. This causes a double jeopardy for ₹ 8.42 lacs. We have further clarified that the deemed income on account of said expenses can be set off only against amount shown or taken as utilised, in accounts or otherwise, toward such expenses. The set off of loss is accordingly allowed. We may, before parting, clarify that the income from horse betting, assessable u/s. 56, is a separate and distinct activity, so that our decision shall not in any manner, impact our decision qua Ground 11 for A.Y. 2005-06. Undisclosed jewellery - Held that - Firstly, that the jewellery stated as gifted to the assessee on the occasion of his marriage by his sister, Amia Khan (at ₹ 2.22 lacs) can only be regarded as reasonable, and is thus accepted. Secondly, even if the jewellery stated to be purchased in December, 2006 (at ₹ 13.16 lacs) cannot be accepted in absence of any bill or other evidence, its being accounted, assuming so, implies absorption of cash to that extent, so that non-acceptance of the explanation would release cash to that extent, for being considered toward other applications. This is further subject to the cash availability being properly explained. The AO shall verify the same, clearly recording his findings, upon allowing the assessee an opportunity to state his case in the matter. Subject to foregoing, we confirm the assessment, and decide accordingly. Unexplained payment - Held that - As apparent from the document, to which s. 292-C applies, the same is in respect of an investment for ₹ 12.07 lacs, partly financed by loan from ICICI Lombard, and partly by cash, with the loan being (or to be) repaid per EMIs, payable on 5th of every month, at ₹ 14,625/-, to ICICI Lombard, through one, Nilesh V. Padhye. The difference of ₹ 38,000/-, as it appears, is the excess repayment in-as-much as the loan would also carry interest, which gets included in the EMIs. Further, the same is clearly unaccounted. The addition under the circumstances could be for the cash component of ₹ 6.07 lacs, plus the EMIs falling due for payment and/or paid during the year. The assessee furnishing no details, it is reasonable to presume 12 EMIs during the year, i.e., ₹ 1,75,500/-. The addition is accordingly restricted to ₹ 7,82,500 (i.e., 6,07,000 1,75,500), and the assessee gets part relief. Unexplained investment by way of payment of membership fee of RWITC - Held that - Surely, if cash payment has also been accounted for in books, as claimed, even this sum may not stand to be included in the assessment. The stand of the ld. CIT(A) that the cash payment is reflected in the books on 10/05/2006, while cash receipt is dated 9/05/2006, may not be material where cash is also available in books on 9/05/2006. The basic issue is of the source of cash in the books as well as the balance in the ABN Amro Bank, which cannot be considered as explained merely because the payment is by cheque. The matter needs proper verification of the assessee s claim of the entire sum being duly accounted for and, thus, explained, and, is accordingly restored to the file of the AO for fresh determination in accordance with law, issuing definite findings. We decide accordingly. Addition toward unexplained cash deposits with ABN Amro Bank - Held that - Cash deposits for a total of ₹ 52.74 lacs in the assessee s savings bank account (# 949548) therewith, which had a balance of ₹ 52 lacs as on 05.1.2007, were found (from f.y. 2004-05 to 2006-07) and, accordingly, addition made for each of these three years. The facts and circumstances, as well as the case of both the parties, being the same, we confirm the addition, as for the preceding two years, for which reference may be made to paras 44 and 61of this order. We may, however, add that there can be no double addition for the same amount, as where the cash deposited is utilised, as by issue of bearer cheque for ₹ 3.50 lacs for payment of car (refer paras 82,83). In other words, the addition is confirmed in principle, though the assessee can show that it results in a double addition, which aspect, where so claimed, the A.O. is obliged to verify, and satisfy himself that there is no double addition. Payment of membership fee of Le Royale Residency Club - Held that - We find little merit in the assessee s case. The explanation, now furnished, firstly confirms the transaction. Two, there is nothing on record to establish the stated source (loans), in terms of identity, capacity or genuineness. We are aware that the payment of ₹ 25 lacs is from ABN Ambro Bank, cash deposits in which have been separately brought to tax (Gd. # 11). However, the cash deposits, assessed as income, total to ₹ 52.74 lacs, as against a balance of ₹ 52 lacs in the said account on 05.1.2007, the date of search. The impugned amount of ₹ 25 lacs, though routed through the said bank account, cannot therefore be ascribed to the said cash deposits; the assessee himself claiming the source as loans raised by him. Clearly, therefore, there is no case for double addition/telescoping nor any stand in its respect taken or case made out, either before the Revenue or before us. The assessee fails. Unexplained expenditure on clothing - Held that - We, accordingly, only consider it proper that the matter is restored back to the file of the A.O. We may clarify that where the inference of purchase or payment toward the subject property is manifest from the document, the onus to exhibit that the purchase which could be in the name of a close relative as well, did not materialise, or no payments were made, would be on the assessee. Unexplained payment - Held that - Only payments up to 28.12.2006, as recorded, could be considered as paid during the relevant year. The impugned sum of ₹ 20.88 lacs may represent the amount for which the payment is to be made. That would, by itself, will not imply that the payment to that extent stands made during the relevant year. The addition, thus, is directed to be restricted to the extent afore-stated. Unexplained expenditure toward cost of one canon camera and speaker - Held that - The assessee s case is general, stating of the evidence with the Revenue as being not conclusive. We find the argument untenable. The document is speaking, in respect of purchase of electronic items of common day use. It is nobody s case that the camera cannot or had not been purchased. Further, what explains the document at the assessee s residence? The amount is nowhere even contended to be disclosed. The addition is, accordingly, confirmed. Unexplained investment in branded, luxury watches - Held that - Firstly, it is the balance in account as on 05/01/2007, and not on 31/03/2007, that is relevant. Two, the assessee s claim/s qua valuation is unsupported by any material on record, even as the reflection in accounts only implies an admission. Watches, to the extent of ₹ 11 lacs have however already been brought to tax for A.Y. 2000-01, and confirmed by us. We observe no valuation difference qua those watches, stated separately in the reconciliation statement. We, accordingly, confirm the addition for the balance ₹ 8.97 lacs (19.97-11.00), and the assessee gets part relief. Addition toward the cost of air travel by the assessee during the year to different foreign locations - Held that - All that was required in that case was for the assessee to exhibit this on the basis of the accounts of M/s. Travel Hub, which would bear the payments in respect of the assessee s travel by KT or his companies. The cost of travel, being based on information from his regular travel agent, has not been contested for most part, with that qua travel to Canada being, again, unsubstantiated. Subject to the AO s verification supra, we confirm the addition u/s. 69C. Further, we also agree that the addition on account of stay abroad is, on the basis of the travel dates and visa period, listed in the assessment order, is reasonable. We decide accordingly.

Summary

Issues Involved:
1. Admissibility of Additional Evidence
2. Validity of Assessments Due to Non-Service of Notice Under Section 143(2)
3. Alleged Non-Grant of Reasonable Opportunity
4. Addition for Unexplained Income from Foreign Companies
5. Addition for Unexplained Money in UBS AG, Zurich
6. Addition for Gifts and Lifestyle Expenses
7. Addition for Unexplained Expenditure on Horses
8. Addition for Unexplained Cash Deposits and Loan Repayments
9. Addition for Unexplained Investment in Properties and Vehicles
10. Addition for Unexplained Transfer Instructions
11. Disallowance of Loss on Horse Betting
12. Additional Income Declared Before Settlement Commission
13. Charge of Interest Under Sections 234A/B

Detailed Analysis:

1. Admissibility of Additional Evidence:
The tribunal discussed the admissibility of additional evidence under Rule 29 of the Income-tax (Appellate Tribunal) Rules, 1963. The rule restricts parties from producing additional evidence unless required by the tribunal for substantial cause or if the income-tax authorities did not provide sufficient opportunity to the assessee. The tribunal admitted some documents from both the assessee and the Revenue, emphasizing the necessity to establish the authenticity and relevance of the documents.

2. Validity of Assessments Due to Non-Service of Notice Under Section 143(2):
The assessee contended that the assessments were void ab initio due to non-service of notice under section 143(2) within the stipulated period. The tribunal found that the notices were duly served, and the assessee's claim was without merit. Additionally, it was held that notice under section 143(2) is not a prerequisite for framing an assessment under section 153A.

3. Alleged Non-Grant of Reasonable Opportunity:
The assessee alleged that the Assessing Officer (A.O.) did not grant reasonable opportunity, violating the principle of natural justice. The tribunal observed that the A.O. provided sufficient opportunities, issuing several questionnaires and show cause notices, and the assessee's claim was dismissed as without merit.

4. Addition for Unexplained Income from Foreign Companies:
The Revenue found the assessee to be operating two companies in the British Virgin Islands, earning substantial income. The assessee failed to provide satisfactory explanations or evidence to rebut the presumption of income. The tribunal restored the matter to the A.O. for fresh adjudication, emphasizing the need for further investigation.

5. Addition for Unexplained Money in UBS AG, Zurich:
The Revenue assessed unexplained money in UBS AG, Zurich, based on transfer instructions and other documents. The tribunal noted the conflicting statements and the need for further verification. The matter was restored to the A.O. for fresh adjudication, allowing the assessee to provide necessary evidence.

6. Addition for Gifts and Lifestyle Expenses:
The tribunal confirmed the additions for gifts to the assessee's son and lifestyle expenses, noting the lack of satisfactory explanations or evidence from the assessee. The tribunal upheld the assessment of living and lifestyle expenses at Rs. 30 lacs per year, allowing credit for any disclosed amounts.

7. Addition for Unexplained Expenditure on Horses:
The Revenue added substantial amounts for unexplained expenditure on horses. The tribunal confirmed the additions, finding the assessee's explanations unsubstantiated and the amounts reasonable based on field enquiries.

8. Addition for Unexplained Cash Deposits and Loan Repayments:
The tribunal confirmed the additions for unexplained cash deposits and loan repayments, noting the assessee's failure to substantiate the sources of these amounts. The tribunal directed the A.O. to verify the availability of cash and ensure no double addition.

9. Addition for Unexplained Investment in Properties and Vehicles:
The tribunal confirmed the additions for unexplained investments in properties and vehicles, finding the assessee's explanations unsubstantiated. The tribunal emphasized the need for further verification and directed the A.O. to adjudicate afresh, ensuring no double addition.

10. Addition for Unexplained Transfer Instructions:
The tribunal confirmed the additions based on unexplained transfer instructions, emphasizing the need for further verification and allowing the assessee to provide necessary evidence. The tribunal restored the matters to the A.O. for fresh adjudication.

11. Disallowance of Loss on Horse Betting:
The tribunal dismissed the assessee's claim for loss on horse betting, noting the lack of substantiation and the distinct nature of the activity from owning and maintaining race horses.

12. Additional Income Declared Before Settlement Commission:
The tribunal confirmed the additions for additional income declared before the Settlement Commission, allowing credit while computing the availability of cash.

13. Charge of Interest Under Sections 234A/B:
The tribunal dismissed the assessee's challenge to the charge of interest under sections 234A/B, noting the compensatory and mandatory nature of the charge and the lack of any claim for excess levy.

Conclusion:
The tribunal partly allowed the assessee's appeals, restoring several matters to the A.O. for fresh adjudication with specific directions, while confirming other additions based on the lack of satisfactory explanations or evidence from the assessee.